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Selective Insurance (SIGI) Down 3.5% Since Last Earnings Report: Can It Rebound?
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It has been about a month since the last earnings report for Selective Insurance (SIGI - Free Report) . Shares have lost about 3.5% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Selective Insurance due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Selective Insurance Q3 Earnings Lag on Higher Expenses
Selective Insurance reported third-quarter 2023 operating income of $1.51 per share, which missed the Zacks Consensus Estimate by 9%. The bottom line increased 52.5% from the year-ago quarter.
The quarter witnessed average renewal pure price increases, new business growth and net investment income. Higher catastrophe losses and escalating costs were offsets.
Behind the Headlines
Total revenues of $1 billion increased 18.1% from the year-ago quarter’s figure, primarily due to higher premiums earned, net investment income and net premiums written (NPW). The top line outpaced the Zacks Consensus Estimate by 1.7%.
On a year-over-year basis, NPW increased 17% to $1.05 billion, driven by renewal pure price increases, exposure growth, stable retention and strong new business. The figure was higher than our estimate of $996.2 million.
After-tax net investment income increased 56% year over year to $80 million. The figure was higher than our estimate of $48.3 million. The Zacks Consensus Estimate was pegged at $72 million.
After-tax net underwriting income was $25 million, which increased 16.8% year over year. Pre-tax catastrophe losses increased 89.4% year over year to $64.6 million. Non-catastrophe property loss and loss expenses of $172.8 million increased 3.1% year over year.
The combined ratio of 96.8 remained unchanged year over year, with improvement in the underlying combined ratio, offset by higher catastrophe losses and no net prior year casualty reserve development.
Total expenses increased 15% year over year to $968.6 million, primarily due to higher loss and loss expenses incurred, other insurance expenses, amortization of deferred policy acquisition costs and corporate expenses. The figure was higher than our estimate of $938.5 million.
Segmental Results
Standard Commercial Lines’ NPW was up 15% year over year to $833.6 million. The premium growth reflected average renewal pure price increases of 7.1%, new business growth of 13%, strong exposure growth and consistent retention of 86%. The figure was higher than our estimate of $798.1 million.
The combined ratio improved 210 basis points (bps) to 94.7. The Zacks Consensus Estimate and our estimate were both pegged at 97.
Standard Personal Lines’ NPW increased 30% year over year to $113.2 million. Renewal pure price increases averaged 6.1%, retention was 88% and new business was up $14.3 million, which drove the improvement in NPW. The figure was higher than our estimate of $90.8 million.
The combined ratio deteriorated 2,560 bps on a year-over-year basis to 127.4. The Zacks Consensus Estimate was pegged at 112, while our estimate was 111.5.
Excess & Surplus Lines’ NPW was up 25% year over year to $111.6 million, driven by average renewal pure price increases of 6.6% and new business growth of 43%. The figure was higher than our estimate of $107.3 million.
The combined ratio improved 910 bps to 83.9. The Zacks Consensus Estimate was pegged at 88, while our estimate was 88.4.
Financial Update
Selective Insurance exited third-quarter 2023 with total assets of $11.4 billion, which was 6% below the level at December 2022 end. Long-term debt of $504.6 million was flat with the 2022 level.
Debt-to-total capitalization improved 60 bps to 16% from the level as of 2022 end.
As of Sep 30, 2023, book value per share was $40.35, up 9% year over year.
Annualized non-GAAP operating return on equity was 15% in the third quarter of 2023, which expanded 450 bps year over year.
Share Repurchase and Dividend Update
In the first nine months of 2023, Selective Insurance did not repurchase any shares. It had $84.2 million remaining under authorization as of Sep 30, 2023.
The board of directors authorized a 17% increase in the quarterly cash dividend to 35 cents per share. The dividend will be paid out on Dec 1 to shareholders of record at the close of business as of Nov 15, 2023.
2023 Guidance
SIGI estimates a GAAP combined ratio of 96.5%, unchanged from last quarter, including net catastrophe losses of 6.5 points, up from prior guidance of 6 points. The combined ratio estimate assumes no additional prior-year casualty reserve development.
Selective Insurance estimates after-tax net investment income of $310 million, up from prior guidance of $300 million. It includes $20 million of after-tax net investment income from alternative investments.
The overall effective tax rate is expected to be around 21%, which assumes an effective tax rate of 20% for net investment income and 21% for all other items.
Weighted average shares were 61 million on a fully diluted basis.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
The consensus estimate has shifted -6.45% due to these changes.
VGM Scores
At this time, Selective Insurance has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Selective Insurance has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Selective Insurance belongs to the Zacks Insurance - Property and Casualty industry. Another stock from the same industry, RLI Corp. (RLI - Free Report) , has gained 0.9% over the past month. More than a month has passed since the company reported results for the quarter ended September 2023.
RLI Corp. reported revenues of $350.37 million in the last reported quarter, representing a year-over-year change of +12%. EPS of $0.61 for the same period compares with $0.50 a year ago.
For the current quarter, RLI Corp. is expected to post earnings of $1.39 per share, indicating a change of -9.2% from the year-ago quarter. The Zacks Consensus Estimate has changed +0.7% over the last 30 days.
RLI Corp. has a Zacks Rank #2 (Buy) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of D.
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Selective Insurance (SIGI) Down 3.5% Since Last Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for Selective Insurance (SIGI - Free Report) . Shares have lost about 3.5% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Selective Insurance due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Selective Insurance Q3 Earnings Lag on Higher Expenses
Selective Insurance reported third-quarter 2023 operating income of $1.51 per share, which missed the Zacks Consensus Estimate by 9%. The bottom line increased 52.5% from the year-ago quarter.
The quarter witnessed average renewal pure price increases, new business growth and net investment income. Higher catastrophe losses and escalating costs were offsets.
Behind the Headlines
Total revenues of $1 billion increased 18.1% from the year-ago quarter’s figure, primarily due to higher premiums earned, net investment income and net premiums written (NPW). The top line outpaced the Zacks Consensus Estimate by 1.7%.
On a year-over-year basis, NPW increased 17% to $1.05 billion, driven by renewal pure price increases, exposure growth, stable retention and strong new business. The figure was higher than our estimate of $996.2 million.
After-tax net investment income increased 56% year over year to $80 million. The figure was higher than our estimate of $48.3 million. The Zacks Consensus Estimate was pegged at $72 million.
After-tax net underwriting income was $25 million, which increased 16.8% year over year. Pre-tax catastrophe losses increased 89.4% year over year to $64.6 million. Non-catastrophe property loss and loss expenses of $172.8 million increased 3.1% year over year.
The combined ratio of 96.8 remained unchanged year over year, with improvement in the underlying combined ratio, offset by higher catastrophe losses and no net prior year casualty reserve development.
Total expenses increased 15% year over year to $968.6 million, primarily due to higher loss and loss expenses incurred, other insurance expenses, amortization of deferred policy acquisition costs and corporate expenses. The figure was higher than our estimate of $938.5 million.
Segmental Results
Standard Commercial Lines’ NPW was up 15% year over year to $833.6 million. The premium growth reflected average renewal pure price increases of 7.1%, new business growth of 13%, strong exposure growth and consistent retention of 86%. The figure was higher than our estimate of $798.1 million.
The combined ratio improved 210 basis points (bps) to 94.7. The Zacks Consensus Estimate and our estimate were both pegged at 97.
Standard Personal Lines’ NPW increased 30% year over year to $113.2 million. Renewal pure price increases averaged 6.1%, retention was 88% and new business was up $14.3 million, which drove the improvement in NPW. The figure was higher than our estimate of $90.8 million.
The combined ratio deteriorated 2,560 bps on a year-over-year basis to 127.4. The Zacks Consensus Estimate was pegged at 112, while our estimate was 111.5.
Excess & Surplus Lines’ NPW was up 25% year over year to $111.6 million, driven by average renewal pure price increases of 6.6% and new business growth of 43%. The figure was higher than our estimate of $107.3 million.
The combined ratio improved 910 bps to 83.9. The Zacks Consensus Estimate was pegged at 88, while our estimate was 88.4.
Financial Update
Selective Insurance exited third-quarter 2023 with total assets of $11.4 billion, which was 6% below the level at December 2022 end. Long-term debt of $504.6 million was flat with the 2022 level.
Debt-to-total capitalization improved 60 bps to 16% from the level as of 2022 end.
As of Sep 30, 2023, book value per share was $40.35, up 9% year over year.
Annualized non-GAAP operating return on equity was 15% in the third quarter of 2023, which expanded 450 bps year over year.
Share Repurchase and Dividend Update
In the first nine months of 2023, Selective Insurance did not repurchase any shares. It had $84.2 million remaining under authorization as of Sep 30, 2023.
The board of directors authorized a 17% increase in the quarterly cash dividend to 35 cents per share. The dividend will be paid out on Dec 1 to shareholders of record at the close of business as of Nov 15, 2023.
2023 Guidance
SIGI estimates a GAAP combined ratio of 96.5%, unchanged from last quarter, including net catastrophe losses of 6.5 points, up from prior guidance of 6 points. The combined ratio estimate assumes no additional prior-year casualty reserve development.
Selective Insurance estimates after-tax net investment income of $310 million, up from prior guidance of $300 million. It includes $20 million of after-tax net investment income from alternative investments.
The overall effective tax rate is expected to be around 21%, which assumes an effective tax rate of 20% for net investment income and 21% for all other items.
Weighted average shares were 61 million on a fully diluted basis.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
The consensus estimate has shifted -6.45% due to these changes.
VGM Scores
At this time, Selective Insurance has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Selective Insurance has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Selective Insurance belongs to the Zacks Insurance - Property and Casualty industry. Another stock from the same industry, RLI Corp. (RLI - Free Report) , has gained 0.9% over the past month. More than a month has passed since the company reported results for the quarter ended September 2023.
RLI Corp. reported revenues of $350.37 million in the last reported quarter, representing a year-over-year change of +12%. EPS of $0.61 for the same period compares with $0.50 a year ago.
For the current quarter, RLI Corp. is expected to post earnings of $1.39 per share, indicating a change of -9.2% from the year-ago quarter. The Zacks Consensus Estimate has changed +0.7% over the last 30 days.
RLI Corp. has a Zacks Rank #2 (Buy) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of D.